State PIRGs' Higher Education Project
218 D Street SE
Washington, DC 20003
(202) 546-9707

Director:
Ivan Frishberg

Advocate:
Ellynne Bannon

March 19, 2002

Dear Mr. Chairman and Senator Domenici,

We are writing to express our concern about the President's proposal to change Section 458 of the Higher Education Act—a mandatory account that provides $780 million a year for student aid management—to a discretionary fund. We are concerned that any change may disrupt the administration of student financial aid programs and place them in financial risk.

The Federal student financial aid programs serve eight million students and parents. The programs are expansive and their day-to-day management has a tremendous impact on students' and families' abilities to navigate financial aid programs and find the funds they need to pay for college.

Currently Section 458 provides funds to: process more than 10 million federal financial aid applications; disburse $67 billion in financial aid; oversee the participation of more than 6,000 schools, 3,500 lenders, dozens of guaranty agencies, accrediting agencies, and state agencies; and collect $85 billion in outstanding direct loans.

An important concept of the current law is that the administrative funds are tied to directly to loan volume. This ensures the appropriate amount of resources to effectively manage these programs.

Section 458 has made it possible to modernize student financial aid processes, eliminate backlogs and ensure stability of student aid programs. The Department of Education's Performance Based Office (PBO) has streamlined the financial aid application process, established an effective Ombudsman's office, and recovered more than $20 million in defaulted student loans. Ample administrative funding for these student aid programs is essential to ensuring their stability and quality.

It is crucial that the administration of student aid programs maintains forward momentum. With $280 billion in outstanding student loans at risk it is imperative that Congress maintain the stability of student aid programs and fully fund the administrative costs that make them work.

We urge you to support the current process of determining student aid administrative costs. Congress should safeguard the stability and quality of these important student aid programs to ensure access to higher education for all Americans.

Sincerely,